Buying your first home in the San Joaquin Valley is a joyful experience, but financing your home purchase can be daunting. With so much information and so many decisions involved in making the big purchase, it’s easy to get overwhelmed. So do your research and shop carefully to ensure you find exactly what you want, need and can afford.
Get familiar with the lingo. The National Association of Home Builder’s Home Buyer’s Dictionary can help you.
Figure out what you can actually afford to pay on a monthly basis. You have more knowledge about your living expenses than a lender. Hold firm with that number and don’t be tempted to agree to a higher amount than what you’re comfortable spending. Mortgage calculators are a great way to figure out what your monthly payments would be based on interest rates and down payment amounts. Calculators can be found on most real-estate-focused websites.
The Down Payment: Being a first time homebuyer, you may qualify for a loan that is insured by the Federal Housing Association (FHA). These loans require you to put down as little as 3 percent of home’s cost. If you go the conventional route, though, these loans require a down payment of up to 20 percent to qualify for a mortgage loan. Begin saving to make sure you have enough when you find your dream home.
Your Credit Report: When you apply for a loan, your credit report is the major thing lenders will look at. Lenders want to see a clean report with a high score. Typically, the higher your score, the lower the interest rate and your down payment. You can request a free credit report each year. Request yours, go over it and make sure any mistakes are corrected before applying for loan.
Pay down your debts. Credit card debt limits what you qualify for from a lender. Lenders want to see a total debt service ratio that is less than 40 percent of your monthly income.
Applying for Credit: As you are in the process of purchasing a new home, and even before that, try to avoid applying for any new credit. Lenders will see this on your credit report, and any new credit inquires within a year of purchasing a home can cause you to be denied.
Investigate Incentives: Many homebuilders offer incentives, including money at closing and free upgrades, to buyers who use their preferred lenders. These lenders understand local loan programs and know how to work with buyers and homebuilders, making the escrow and closing processes smoother and easier.
Get Pre-Approved for Your Loan: When you’ve done your research and are ready to move on to the next step, visit with the homebuilder’s preferred lenders. They’re often on site to answer questions about the loan choices available to you and get you pre-approved. Knowing how much money you can borrow will determine what price range you should look at, eliminating a lot of unnecessary searching. You can pre-qualify for a loan before you visit a homebuilder, but be sure to discuss all of your options with the homebuilders’ preferred lenders.
If you’re looking for additional information on financing your first home, don’t hesitate to contact us. At San Joaquin Valley Homes, we pride ourselves on finding buyers their perfect home with the best financing options.